Samsung, Hyundai kick off tight race for lucrative Gangnam site

Competition could lift bidding price to 5 trillion won

South Korea’s top two conglomerates ― Samsung and Hyundai ― have jumped into a heated bidding war to secure an 80,000-square-meter site in Samseong-dong, an affluent district in southern Seoul.

The lucrative property, currently the headquarters of Korea Electric Power Corp., was put up for sale officially last Friday as KEPCO will relocate its head office to Naju, South Jeolla Province, in November.

The market value of the site is about 3.3 trillion won ($3.2 billion). Industry watchers predict the final bidding price could surge to 5 trillion won, considering the eagerness of the two bidders.

Hyundai Motor Group, which has struggled to find the right site for its global headquarters in recent years, has often expressed publicly its intent to acquire the KEPCO site.

Its current head office building in Yangjae-dong, southern Seoul, accommodates only 5,000 employees out of the total 18,000 workers at some 20 affiliates.

Through securing the new site, the automotive group said it aims to create a new global business hub that supervises all affiliates, including global operations, and features a research and development center, a brand museum and other facilities.

“Having a fancier headquarters building, much like its global rivals, is crucial to represent our upward global status,” said a Hyundai executive on condition of anonymity.

“After several failed attempts, the KEPCO site is one of the few options left for us.”

If Hyundai manages to secure the site from the state-run energy company, the new headquarters will be the largest one owned by a Korean conglomerate here ― three times larger than the “Samsung Town” in Seocho-dong, southern Seoul, and six times larger than the LG Twin Tower in Yeouido, western Seoul.

Meanwhile, Samsung hopes to use the site for a large commercial complex consisting of a luxury hotel and a shopping mall.

Samsung has pushed the plan since 2011, when its affiliate Samsung Life Insurance acquired the neighboring site of the Korea Appraisal Board for 232.8 billion won.

With a task force team completing related evaluation work, all three children of ailing Samsung Electronics chairman Lee Kun-hee ― heir apparent Lee Jay-young and his sisters Boo-jin and Seo-hyun ― are said to have joined hands to win the bid.

The government’s planned taxation on cash reserves of conglomerates is also cited as one of the key reasons why the two companies are prepared to spend big, industry watchers said.

Under a new corporate tax scheme, the government plans to offer tax benefits to companies for making new investments and purchasing properties for business use.

“Some 10 to 15 percent of the spending could be reimbursed,” said an industry source on condition of anonymity.

Industry watchers say the soaring bidding price would not be a serious issue for either company considering their abundant cash reserves.

According to FnGuide, a corporate financial information provider, Samsung and Hyundai held 186.5 trillion won and 111.7 trillion won in cash, respectively, last year.